The Fall of Online P2P Lending in China: A Critique of the Central-Local Co-regulatory Regime

35 Pages Posted: 23 Jun 2021

See all articles by (Robin) Hui Huang

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law; 华东政法大学(East China University of Political Sicence and Law); University of New South Wales - Faculty of Law

Christine Meng Lu Wang

The Chinese University of Hong Kong (CUHK) - Faculty of Law

Date Written: January 18, 2021

Abstract

Online Peer-to-Peer lending (P2P lending or online lending), as an important component of financial technologies (fintechFinTech), was once very popular in China, but by the end of 2020, it had been completely wiped out from the Chinese financial landscape. This is not really due to business failure, but is essentially a product of regulatory dysfunction. Since 2015, China has tried to regulate the P2P lending market by establishing an innovative central-local co-regulatory regime under which local regulators are incentivized to contribute to the regulation of P2P lending in cooperation with the central government. Nevertheless, it seems that the central-local cooperative regulation has failed to achieve its purpose considering the dramatic fall of the P2P lending market in practice. There are serious regulatory issues at both the central and local levels. The central government fails to make proactive regulatory responses to the rise of P2P lending, yet takes heavy-handed measures to control risks after the outbreak of a market crisis. Local regulators, on the other hand, fail to strike a balance between promoting economic growth and protecting investors. The incomplete devolution of regulatory power to local governments also leads to difficulties assigning responsibility between regulators at different levels. There are implications for the central-local co-regulation in China, including the clear allocation of the central and local regulatory power, the enhancement of the local regulator’s independence and the establishment of central-local coordination mechanisms.

Keywords: online P2P lending; fintech; central-local co-regulation; China; financial regulation

JEL Classification: G23; G32; K22

Suggested Citation

Huang, (Robin) Hui and Wang, Christine Meng Lu, The Fall of Online P2P Lending in China: A Critique of the Central-Local Co-regulatory Regime (January 18, 2021). Banking and Finance Law Review, Forthcoming, The Chinese University of Hong Kong Faculty of Law Research Paper No. 2021-33, Available at SSRN: https://ssrn.com/abstract=3869264

(Robin) Hui Huang (Contact Author)

Chinese University of Hong Kong - Faculty of Law ( email )

Shatin, New Territories
Hong Kong
852-39431805 (Phone)
852-29942505 (Fax)

HOME PAGE: http://www.law.cuhk.edu.hk/app/people/prof-robin-huang/

华东政法大学(East China University of Political Sicence and Law) ( email )

1575 Wanhangdu Rd.
Changning, Shanghai 200042
China

University of New South Wales - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia
61-2-9385 9649 (Phone)
61-2-9385 1175 (Fax)

Christine Meng Lu Wang

The Chinese University of Hong Kong (CUHK) - Faculty of Law ( email )

6/F, Lee Shau Kee Building
Shatin, New Territories
Kowloon, Sha Tin
Hong Kong

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